New York, NY – Last week, former SAC technology analyst, Wesley Wang, was sentenced to probation in federal district court after pleading guilty to insider trading as a result of his cooperation with federal authorities. Wang purportedly informed federal prosecutors of 20 people who were involved in insider trading.
A native of Taiwan, Mr. Wang, worked as a technology stock analyst at the SAC’s Sigma Capital unit between 2002 through 2005. Last year, Mr. Wang pleaded guilty to passing on insider information to others while working at SAC and another hedge fund caught up in the insider trading scandal, Whitman Capital
After being approached by the FBI in January 2009, Wang agreed to cooperate and began wearing a wire to meetings and on telephone calls with numerous contacts and colleagues in the investment management industry over a prolonged period of time.
As a result of his cooperation, Wang turned over 20 names to the government of people who he says are involved in insider trading. According to the government, the information that Wang provided federal prosecutors has already contributed to the criminal convictions of more than 10 people. They also acknowledge that the full benefit Mr. Wang’s cooperation is still being realized.
Judge Jed S. Rakoff, who presided over the sentencing in Federal District Court in Manhattan, said he gave Mr. Wang probation because of the extraordinary assistance he provided to federal prosecutors.
Rakoff explained his leniency by saying, “Prosecutors could not achieve the major successes they’ve achieved in complex crimes like insider trading without asking judges to give a very substantial benefit to cooperators.”
Potential Consequences for SAC
Mr. Wang’s cooperation with the government could have an impact on his former employer, $14 bln hedge fund, SAC Capital. Mr. Wang is one of at least six former traders or analysts previously associated with SAC Capital who have been tied in some way to the current insider trading investigation while they were at the hedge fund.
Among the people that Mr. Wang identified as being involved in insider trading was his former boss while employed at SAC, Dipak Patel. Wang said he passed confidential information about various technology companies to Mr. Patel, according to a court filing. Mr. Patel, who has not been charged, left SAC in 2011.
In addition, Wang’s lenient sentence could help convince others caught up in the insider trading case to cooperate with the government.
Last month, Mathew Martoma, a former SAC portfolio manager, was indicted in a $276 million insider trading case associated with two pharmaceutical companies, Wyeth and Elan. While SAC founder Steven A. Cohen was not specifically named in this case, it is clear that the government is trying to get Martoma to cooperate with them in order to build a better case against Mr. Cohen. Thus far, Martoma has refused to cooperate and pleaded not guilty.
Late last year, the U.S. Securities and Exchange Commission served SAC Capital with a Wells Notice, saying that it is considering pursuing civil fraud claims related to alleged insider trading in the Martoma case.
In response to this development, SAC Capital told its employees and business partners that it expects investors are likely to withdraw at least $1 billion in assets from the firm as the government continues to investigate allegations of insider-trading. Some estimate that this could have an impact of $30 million on the firm’s revenue.